“On a foggy day in 1871, two men walked into the Bank of California in San Francisco. One held a rifle and the other gripped a large buckskin pouch. Both were covered in a thick layer of grime. Initially, the nervous teller took the shady drifters for bank robbers. But his anxiety turned to elation when they showed him the contents of their pouch — a shimmery bounty of diamonds, rubies and sapphires.”
– from “Diamonds: The Rush of ’72,” by Sam North
This passage from Mr.North’s novel describes the first step of an extremely daring scam that was pulled on one of the most prominent bankers in the country by a pair of Kentucky grifters. By the time their hoax was discovered and reported on today’s date, November 26, in 1872 in the San Francisco Chronicle, it had come to involve some of the most prominent names in America. Greed would get the best of these tycoons, but it would wind up making a hero out of an unknown Geologist.
The Gold Rush Days in America
The Gold Rush which struck the United States and the rest of the world as a result of gold found in Sutter’s Creek in January of 1848 had a huge impact on peoples lives. People from all walks of life abandoned everything to go and try their luck at getting rich quickly. The young Lieutenant William Tecumseh Sherman wrote: “Not only did soldiers and sailors desert, but captains and masters of ships actually abandoned their vessels and cargoes to try their luck at the mines. Preachers and Professors forgot their creeds and took to trade, and even to keeping gambling houses.” So it is hardly surprising that more than a few people turned to fraud in order to make their fortunes. A common practice was that of “salting” the grounds of a mine. This meant taking a few pieces of gold, or a small quantity of gold dust and planting it on the grounds of a certain plot of land in order to make it seem to a gullible prospector, or a would-be investor that it was a claim rich with gold. Then the huckster doing the salting could sell the worthless claim for big bucks, and disappear with the loot.
Arnold and Slack Show Up With a Bag.
Well, it wasn’t always the gullible who fell for this scam. Philip
Arnold was a poorly educated Mexican War Veteran who, by 1870 was a bookkeeper for the Diamond Drill Co., a San Francisco producer of drills which used diamond bits. Arnold (above, left) was from Kentucky, and together with his cousin, John Slack (above, right) he hatched an extremely daring con. Dressed as ordinary prospectors and appearing to be a pair of oafish bumpkins they arrived at the office of George D. Roberts late in November of 1870 clutching a small bag. The bag held something of great value which they said which they wanted to deposit with the bank of San Francisco, but it was late in the day. Seeming very suspicious, they whispered about the bag’s contents, mentioning diamonds just loudly enough for Roberts to hear it. Dollar signs flashing before his eyes, Roberts eventually got his shy visitors to show him the contents of their bag: a bunch of uncut diamonds (which Arnold had swiped from his job). Then they let it slip that they had found these gems somewhere in Indian Territory.
Roberts Was “Very Much Elated….”
“Roberts was very much elated by our discovery, and promised Slack and myself to keep it a profound secret until we could
explore the country further and ascertain more fully the extent of our discoveries.” as Arnold told the Louisville Courier-Journal in December of 1872. Of course, Roberts promptly broke his promise to keep it quiet (as Arnold knew he would) by blabbering the whole story to one William Chapman Ralston, founder of the Bank of California. Ralston was one of the most prominent financiers of his day, having invested in the legendary “Comstock Lode” (the huge find of silver in Nevada in the 1860’s), the Transcontinental Railroad (operational and linking the country by 1869) and dozens of other ventures. Amazingly enough for a supposedly shrewd businessman, Ralston swallowed the entire story – hook, line and sinker. He fronted the pair $50,000 to go back and check on the “mine” and come back with more evidence. So they took this cash, went to London, and bought more uncut, and crummy gems.
More Big Names Are Lured Into the Trap
While they were away, Ralston and Roberts lured more tycoons into this trap as investors, including William Lent, and Asbury Harpending, who was no more honest then the rest of these greed-heads, but who left an amusing, if self-serving memoir entitled “The Great Diamond Hoax and Other Stirring Events in the Life of Asbury Harpending.” This fantastical memoir records the events in the summer of 1871 when the investors met with Arnold and Slack. By this time the two hucksters had their routine down pat, with Arnold playing the solid, taciturn man, while Slack appeared to be something of a sleeping blow-off:
“Slack was asleep like a tired-out man. Arnold sat grimly erect like a vigilant old soldier with a rifle by his side, a bulky looking buckskin package. Slack soon awoke and we discussed the business in hand in low tones. The men told a rather lurid story, but yet not improbable in it’s way. They said they had luckily struck a spot which was enormously rich in stones, which they estimated to be worth two million dollars…”
Later the men met at a club and Harpending displayed the “find” for everyone to see: ” A sheet was spread on my billiard table, I cut the elaborate fastenings of the sack and, taking hold of the lower corners, dumped the contents. It seemed like a dazzling, many-colored cataract of light” Their eyes dazzled by all of this loot, Ralston, Lent and Harpending in October of 1871 took all of this to be examined by no less than Charles Lewis Tiffany: yes THAT Tiffany, of Tiffany’s of New York, the famous jeweler. By this
time they had invited others who were eager to get in on the ground floor of this “gem find”. This expanded group included Generals George B. McClellan and Benmain F. Butler, both of Civil War fame and Horace Greeley soon to be a candidate for President. According to Harpending, Tiffany “Viewed them gravely… and held them up to the light, looking every whit the part of a great connoiseur.” The fact is that neither Tiffany, nor his lapidary to whom he took these stones were at all experienced in handling UNCUT diamonds which is what these were. Nevertheless, Tiffany declared these stones to be the real thing! Arnold’s $20,000 worth of crummy uncut stones which he had bought in London were thus declared by Tiffany to be real stuff straight from the “mines” worth over $150,000!! This veritable gallery of boobs is pictured above and can be viewed and IDed by clicking on the picture to enlarge it.
The Summer of 1872: The Plot Thins
By now the time had come to examine the mine site itself. A group including Henry Janin, respected engineer selected by Ralston & Co. was assembled, but because of cold weather did not depart
for the “Mine site” until June of 1872. In the interim, Arnold and Slack had gotten to the site in Colorado (pictured above in 1872) and “salted” it liberally with more cheap uncut diamonds which they had bought in London. Then, when leading the group to this faux mine site, they took the most circuitous, round about way there that they could manage. Thus, by the time that the group arrived there, they were not at all sure where it was, and they were tired and angry with each other, and anxious to find all of these gems. I’m not sure why Janin was so gullible, but he, the only trained mining man present eagerly accepted all of the easily found “gems” which Arnold and Slack pointed out to him. And he began sending wildly enthusiastic reports about the richness of the site back to Ralston. Arnold and Slack were quickly payed off with the remainder of @$600,000.00 that they were given by Ralston for the ownership of the mine. Then they disappeared for good, Slack never to be seen again, and Arnold to his farm in Kentucky. Meanhwile, Ralston had lined up over ten MILLION dollars worth of investors for this find of a lifetime as the newspapers of the time were touting it.
The Hoax is Finally Uncovered and Trumpeted Into the Papers
At long last the hoax finally began to fall apart. By chance, Janin and his men were on an Oakland bound train on which a party of geologists lead
by Clarence King (pictured left), a Yale-educated geologist happened to be travelling. King had been fighting Congress for funding of his geological expeditions to the precise area wherein Janin and his “find” were. King and his men had surveyed the entire area and were well familiar with it. When they overheard Janin and his men talking about all of the gems that they were going to find there, King’s ears perked up. Joining in the talk, they offered to go to the precise location and determine whether there were any jewels to be found. If there were jewels to be found there it would make him and his group of surveyors who had found no such thing look pretty lame. So in October of 1872, King and his men arrived at what they knew to be the Colorado location described by Janin. And they quickly concluded that the gems which had been found there had indeed been used to “salt” the area. It was not, they concluded a mine at all, and Ralston and his investors had been defrauded.
On Novmber 10, King went to Janin’s hotel to tell him of his findings. “Through nearly all the night I detailed to him the discovery, and at last convinced him of its correctness.” King would later record. Janin and King went to Ralston and his men the next morning and spilled the beans about the enormous fraud to which they in their eagerness and greed had subjected themselves. And shortly thereafter the news was spread all over the newspapers, beginning with banner headlines on this morning’s San Francisco Chronicle: “UNMASKED!” and below that: “THE MAMMOTH FRAUD EXPOSED”, “The Great Diamond Fiasco,” And along with that came the“Astounding Revelations.” which of course contained plenty of abuse of Janin for allowing himself to be so easily taken. Every one of the men in Ralston’s group suffered extreme public humiliation for having been defrauded by these two unsophisticated bumpkins.
As for the two “bumpkins”, Slack had indeed disappeared from view. It was reported by one source that he had squandered his part of the take and died in 1896, having spent his last days as a casket maker. Arnold, for his part had returned to his farm in Kentucky and spent his money on improving the place. A grand jury in San Francisco indicted Arnold and Slack for fraud, but the contents of the indictment were kept private. They were likely kept quiet in order to spare the investors more bad publicity. Eventually, Arnold settled out of court with investor William Lent for $150,000.00. He would die of pneumonia in 1878 at age 49. The only man to come out of the whole mess with his reputation enhanced was Clarence King and his band of intrepid surveyors (pictured above). King was hailed as a hero for his scientific methods which had unmasked this dastardly fraud. He eventually became a personal friend of President Theodore Roosevelt and was appointed as the first director of the U.S. Geological Survey.
“The Great Diamond Hoax of 1872” by Robert Wilson, Smithsonian magazine, June, 2004
“This Day in History” The History Channel Website
“Exposing the Great Diamond Hoax” by Cassandra Willyard, “Earth”, Nov. 26, 2008
Arnold and Slack: http://jy3502.hubpages.com/hub/Old-West-Swindles-and-Cons
Wm. Ralston: http://en.wikipedia.org/wiki/William_Chapman_Ralston
Clarence King: http://en.wikipedia.org/wiki/Clarence_King
Clarence King, et al: http://www.earthmagazine.org/article/benchmarks-exposing-great-diamond-hoax